Most owners of construction companies came up through the operations side. They were in the field early in their careers, learning their trade from the ground up.
Today, many contractors find themselves owning a business that has grown significantly from where it started. They generally aren't experts in organization structure and therefore aren't aware of the need to assess the organization they have in place to handle the current and future volume of the business.
Lack of business expertise is certainly not unique to business owners in the construction industry. Most business owners, no matter the industry, weren't trained to run a business. The core principles and skillsets involved in running a construction business are the same as those needed to run a manufacturing business, a professional services firm, a retail store, etc.
Most of the skillsets involved in managing a business efficiently and effectively revolve around how one deals with the issue of people. One has to put the right team in place and keep the team working towards the same goals. It's imperative to have the right people in our organization and have those people in the right places within the business.
It is extremely important for a business owner to identify both the position slots needed, and gaps which may exist, on his or her team. The gap analysis is an effective way to accomplish that objective.
Keep Up with Your Growing Business
We all tend to work within our comfort zones. If the construction business owner came up through the field operations, he or she will tend to run the business from that perspective. The office may be viewed as overhead and the number of people allocated towards office functions may not be appropriate. The accounting department may find itself short-staffed and the owner may find him or herself spending little on the accounting function.
At the same time, the owner is probably not getting adequate financial and management reports resulting in poor and/or untimely decisions being made or not made, costing the business far more than the savings in short spending on the accounting and reporting function. The same scenario could be painted for the operations side of the house-not having enough people in a certain function or missing a function altogether.
Most contractors started out doing a few million dollars in revenue (sometimes less) in their first few years and today find themselves doing $20, $30, $50 or more million annually in revenue.
The organization structure for a $5 million a year contractor is very different from that of a contractor doing $50 million a year. Often times, as a contractor moves through various revenue levels, he or she does not keep up with those revenue changes with the appropriate changes in the infrastructure of the business. Many contractors can grow reasonably successfully up to approximately $20 million in annual revenue without significant changes in their infrastructure. That's not to say that changes should not have been made during that growth period, but many of these businesses tend to perform at least at an average level. When businesses grow past $20 million in annual revenues, few contractors can successfully navigate those volume levels without significant mistakes and financial pain. The reasons usually trace back to not having the appropriate personnel in place in key management positions to deal with the issues which invariably arise in organizations of that size.
There are significant "gaps" in management which, in best case scenarios, would have been filled as the contractor was approaching the $50 million revenue levels to begin with. Many owners refuse to allow other top level management personnel do their jobs without some micromanagement, or they don't acquire top level management to help professionally run the business as many contractors are "overhead" averse. Those actions by an owner can ultimately cripple a business that otherwise has solid prospects as long as the right team was
